Author:Terry Gorry

Are you a small business owner? If you are it is almost certain that you are experiencing the most difficult trading conditions you have ever faced. The economy, with a small number of exceptions, has virtually shut down as a consequence of the Covid-19 crisis.

And it is to continue for an unknown period.

If you are like any of the small business owners who have contacted me in the last few weeks you will be enquiring if there are any supports for entrepreneurs and SMEs.

Let’s take a look, shall we?

The COVID-19 Wage Subsidy Scheme

The purpose of this scheme is to encourage you to keep your employees on in employment and not lay them off. The scheme will provide a subsidy of 70% of the average weekly take home pay for each employee, up to a maximum of €410.

This scheme is for qualifying businesses with less than 500 employees and provides loans from €25,000 to €1.5 million and is administered through AIB, Bank of Ireland, and Ulster Bank. Loan terms range from 1 to 3 years with a maximum interest rate of 4%.

There are plenty of qualifying criteria, some of which include showing that COVID-19 has caused a fall in turnover or profitability of at least 15%.

A Future Growth Loan Scheme

This is for businesses, farmers, and seafood enterprises impacted by COVID-19. Loans of 8 to 10 years are available from €100,000 to €3 million for eligible enterprises. Interest only repayments is a possibility as are unsecured loans.

SME credit guarantee scheme

This scheme if for enterprises with less than 250 employees, turnover of €50m or less, not part of a wider group of companies, and have less than 25% of their share capital held by public bodies. Banks involved in the scheme are AIB, Bank of Ireland, and Ulster Bank and facilities of up to 7 years in the range of €10,000 to €1,000,000 are available.

The Sustaining Enterprise Fund

This is open to companies with 10 or more full time employees and are in the internationally traded services sector or in manufacturing. Loans of up to €800,000 are available with a 3 year grace period on repayment.

Microfinance Ireland

Microfinance Ireland can provide loans of up to €50,000 to microenterprises-that is, less than 10 full time employees and less than €2,000,000 annual turnover. Loan term is a maximum of 3 yeas with a moratorium of 6 months on interest and loan repayments. This scheme is open to sole traders, partnerships, companies and there is also a €2,500 tradubg online voucher to help develop an online presence in the form of a website or a facility to accept online payments from customers/clients. Enterprises can apply for a second voucher where they have used up the first one correctly.

Business financial planning grant

This is a support from Enterprise Ireland and for qualifying enterprises affords a grant of up to €5,000 for financial planning.

LEAN business improvement grant

This is a grant of €2,500 for a training project of up to 3 days carried out by an approved trainer.

COVID-19 retail online scheme

This is for retailers who employ in excess of 10 people and grants range from €10,000 to €40,000 for retailers with an existing online presence. The grant is intended to cover up to 80% of the project costs for a competitive online offer.

Restaurants and cafes-planning relaxation

No need to apply for planning permission for restaurants and cafes to provide a takeaway service between 13th March 2020 and 31st May 2020.

COVID-19 financial support scheme for nursing homes

This scheme as €72 million available and is to run for a temporary 3 month period. There are two parts to the scheme: a) financial assistance for the month ahead in the form of €800 per month per resident for the first 40 residents and €400 per resident for the next 40; b) finance for enhanced outbreak assistance in the event of a coronavirus outbreak in the home.

Revenue Commissioners

The Revenue are operating a range of relaxations and assistances including suspending interest on certain late payments, debt enforcement activity is suspended, RCT rate review suspended, tax clearance certificates will remain in place for the next few months, and other breaks concerning local property tax.

Local Enterprise Offices

Local enterprise offices can provide business continuity vouchers of up to €2,500 for businesses that employ up to 50 people to develop strategies to combat the effects of the COVID-19 catastrophe.

I am often asked by budding entrepreneurs to review the lease of a commercial premises which is part of a small business they are considering purchasing.

The entrepreneur, understandably, is trying to avoid as much avoidable expenditure as possible and wants the lease reviewed for a competitive fee.

I can do that, of course, without any difficulty but I have to explain that reviewing the lease alone is of extremely limited value.

Because most commercial leases emanate from a standard template or precedent lease which is widely used and accepted by solicitors in Ireland. Therefore any difficulties in the proposed acquisition of the business and taking on of the lease are unlikely to be contained within the terms, covenants, and conditions of the lease which are similar across commercial leases.

What are the dangers?

Potential problems are more likely to appear in relation to other issues outside the lease, issues like

Title-is there good legal title to the lease? Was the granting of the lease in the first instance in order?

Planning-are there any planning issues arising from the use of the premises? And any development carried out over the years, development that would have required planning permission?

Is the premises being used for a use permitted by the lease?

Rates/charges-are there any issues in respect of rates or other charges that may attach to the premises and is there any arrears for which the new occupant may become liable?

Is there a management company? Are there outstanding charges?

What condition is the premises in?

Are there any issues likely to arise from a fire safety perspective?

If the business is involved in food preparation and sales are the necessary plumbing, electrical, food preparation, refrigeration issues compliant with building regulations and any applicable food regulations?

If you are considering taking on a business in which there is a leased premises you are taking an avoidable, critical risk by not having all aspects of the lease assignment investigated.

This involves pre-lease enquiries about title, planning, rates, and so forth being properly investigated. None of these issues will be dealt with by a review of the lease alone.

Yes, it will cost you more money.

Yes, there may be no further issues.

But checking the lease on its own is of extremely limited value and if your finances cannot stretch to having the transaction carried out property, with the necessary checks and pre-lease enquiries carried out, you should seriously consider your investment.

Because you cannot afford it. You are too early and it is premature.

You might be as well going to a casino and putting all your money on red, or black.

Because the likelihood is that any problems that arise from your purchase of the business will not necessarily be contained in your lease, they will probably lie elsewhere, outside the 4 walls of the lease itself.

Are you a landlord or tenant of a commercial lease? Depending on when you entered into the lease it may provide for ‘upward only’ rent reviews.

Commercial leases from before February 2010 typically contained upward only rent reviews. This meant that the rent could only increase at each rent review date, and that is what the parties had signed up to in the first instance.

132.— (1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.

(2) Subsection (1) shall not apply where—

(a) the lease concerned, or

(b) an agreement for such a lease,

is entered into prior to the commencement of this section.

(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed

(4) Subsection (3) shall apply—

(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and

(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.

The vitally important change is contained in subsection (3) which now permits the rent to stay the same or fall at rent review time. This effectively prohibits the use of ‘upward only’ rent review clauses in commercial leases from February 2010.

You will note, therefore, this significant difference between leases which were entered into prior to the Land and Conveyancing Law Reform Act 2009 and those signed after the commencement of this act.

Deed of variation

There is a significant consequence flowing from this act and the granting of a deed of variation between the parties after February 2010. Let me explain.

If the parties agree a deed of variation, which may deal with a reduction in the rent and other terms, it is possible that the granting of this deed will bring about a de facto surrender of the original lease.

The consequence that flows from this, if it occurs, is that the new lease cannot contain an enforceable upward only rent review clause and the landlord will have a less valuable property interest.

And you need to understand that the intentions of the parties when entering into the deed of variation are immaterial; the fact is that if the lease term is extended you are probably looking at a new interest in the land and you can rest assured you do not have 2 leases as the first one will be a deemed surrender.

Deemed surrender

How could this deemed surrender occur?

One of the ways this can happen is if one of the terms of the old lease which is varied/changed is the term of the lease. If the term is increased, for example, there is decided UK case law which holds that if a term is increased a new legal interest in the land comes into existence and the old one, the original lease, is deemed to have been surrendered.

Conclusion

The law surrounding land and interests in land can be complex and requires professional legal advice. Each case must be looked at on its own particular facts and circumstances.

However, one thing is clear: should you not obtain professional advice you run the risk of making a costly mistake that can greatly affect the value of the interest you hold, either as a landlord or tenant.

Regardless of which structure you adopt you will need to
register with the Revenue Commissioners for taxation purposes. If you set up a
limited company, you will be paying corporation tax on your profits; if you do
not incorporate a company you will be accounting to the Revenue Commissioners
on a self-assessment basis.

You may also need to register for VAT, depending on your
business and its turnover, and as an employer.

If you are simply setting up an online business there is no
additional regulatory steps you need to take; obviously, you will need a website
but you do not need any legal permission or registration for this.

However, if you want to get an Country Code TLD (top level
domain) name you will need to apply to IEDR.ie
which is the Irish IE domain name registry. This body helps to protect
your domain name and provides a process by which domain name disputes can
be resolved.

From a legal/regulatory perspective you will note that
setting up a business is a straightforward task with a minimal number of bureaucratic
hoops through which to jump.

The most critical factor in your success will be obtaining
clients or customers and providing such a good service or product that your
business will grow through a mixture of new client acquisition and repeat
business from satisfied customers and good word of mouth.

Once you get a bit of momentum you can look at the most
effective ways of promoting your business and acquiring new business. This will
almost certainly involve some element of digital marketing, including social
media marketing.

Beware of spoofers

You will also need to have an inquiring, learning mind to growing
your business and learning from those who have gone before you and made
mistakes and successes. You can learn a huge amount from books of successful
entrepreneurs, for example. Most of these people made costly mistakes from
which you can learn without the need to repeat the mistake.

The power of books in this regard is enormous and if you do
not like reading or if you don’t have the attention span to apply your mind to a
book for at least one hour per day you are selling yourself short.

But you also run the risk of being misled and misinformed by
people who I describe as spoofers; what I am referring to is people who have more
knowledge about business or marketing than you do but who could not be
genuinely described as expert in the sphere.

There is a qualitative difference between real experience
acquired from building businesses over many years and somebody who is now
positioning themselves as experts in some sphere of activity when there is no
real substance to their claimed expertise, save for them knowing a bit more than
you at this stage of your business development.

Don’t fall for it.

Some people have an innate level of cunning or street smarts or lack of naiveté; some people are inclined to naiveté and can be easily parted from their money with a bit of smooth-talking patter. Beware of this problem and if you are inclined to the second category take your time and do plenty of research first before acquiring the services of any supposed expert.

Work that matters

Do work that matters.

There is a qualitative difference between doing the work that matters, doing great work, acquiring clients, growing your business and things that don’t really matter but are inclined to stroke your ego-for example, shallow stuff like mentions, fans, likes, awards that may not amount to a hill of beans.

Galway Free Range Eggs

This test was reviewed again in a case involving free range eggs in Galway.

Galway Free Range Eggs Limited had gone to the High Court for an injunction preventing a competitor, Hillsbrook Eggs Limited, from selling their eggs under the name of “O’Briens of Galway Free Range Eggs”.

Galway Free Range Eggs Limited claimed passing off by Kevin O’Brien, Carmel O’Brien and Hillsbrook Eggs Limited as they claimed there was likely to be confusion in the minds of the public concerning their eggs and those of the Defendants. The High Court had refused the application for an injunction. Galway Free Range Eggs Limited appealed to the Court of Appeal.

Background

Galway Free Range Eggs Limited were unhappy when the defendants began selling their eggs as “O’Briens of Galway Free Range Eggs”.

The High Court had held that the Plaintiff had failed to prove misrepresentation leading to confusion by the defendants and found consumer survey evidence to this effect of limited value.

Court of Appeal

The Court of Appeal held that Galway Free Range Eggs Limited had established that the defendants had engaged in passing off and were entitled to an injunction to protect its good name and reputation. The Court also held that the High Court had erred in dismissing the survey evidence and EU regulations which obliged the defendants to label their eggs as free range did not mean they had to include the words “free-range eggs” in their brand name.

Applying the 3 part test

1. Goodwill/reputation

The Court of Appeal accepted that Galway Free Range Eggs Limited had established goodwill in the use of the word “Galway” in connection with the words “free range eggs”.

2. Confusion

The Court held that the appropriate test to be applied was whether the public were likely to be victims of confusion arising from the Defendants use of the words “Galway free range eggs” in its packaging and found that the High Court had erred in failing to apply this “confusion” test once it found that the Plaintiff had failed to find misrepresentation leading to confusion.

The Court of Appeal also held that the High Court should have had regard for the survey evidence adduced by the Plaintiff and that it was permissible to admit survey evidence; it was then a matter for the Court as to how much weight was given to that evidence.

The survey evidence showed that there was confusion amongst the 29% of the population and that this was sufficient to establish confusion and fulfill the 2nd part of the test. The Court of Appeal also found it was not necessary to put particular members of the public into evidence to give evidence about confusion and survey evidence could be relied upon.

A company can be dissolved by liquidation and there are three
categories of liquidation:

A voluntary liquidation by the members after the
making of a statutory declaration of solvency

A voluntary liquidation by the members which is
ratified by the company creditors

A court ordered liquidation

In a voluntary liquidation the appointed liquidator must
file accounts with the Companies Registration Office and the company is then
dissolved 3 months after that.

Every invoice, letter, email or order for goods thereafter
should indicate that the company is in liquidation.

Members voluntary winding up

The two main requirements for a members voluntary winding up
include:

A statutory declaration of solvency

A special resolution must be submitted to the
CRO (Companies Registration Office)

The Declaration of Solvency is made on form E1 which
involves the directors declaring that they have enquired into the affairs of
the company and are of the opinion that the company will be able to pay its
debts in full within a period of 12 months from the commencement of the winding
up.

Within 1 month/30 days of making this declaration of
solvency the members must pass a special resolution to wind up and appoint a
liquidator (form G1).

The resolution to wind up must be advertised in Iris
Oifigiúil within 14 days of passing the resolution.

Forms E1, G1, and a Notice of Appointment of Liquidator
(Form E2) must be filed with the Companies Registration Office.

Procedure for commencement of a members’ voluntary winding up

Section
579 of the Companies act 2014 sets out the procedure for the commencement of
a members’ voluntary winding up in Summary Approval Procedure, which requires a
special resolution of the directors.

Alternatively, an ordinary resolution of the directors will
be sufficient if the procedure under section 580 of the Companies act 2014 is
adopted in respect of companies of fixed duration or a company which is to
dissolve on the happening of a fixed event:

a) on the expiry of
the period, if any, that is fixed for the duration of a company by its
constitution; or

(b) should such
happen, when the event occurs on the occurrence of which a company’s
constitution provides that the company is to be dissolved;

a members’ voluntary
winding up of the company may, alternatively to the employment of the Summary
Approval Procedure for that purpose, be commenced in accordance with section
580.

In summary, three forms must be filed with the CRO
(Companies Registration Office): E1, E2, and G1 and an advertisement must be
placed in the Iris Oifigiúil publication.

A form E3 may be required if the liquidation is not completed
within 12 months; E3 is a form in which the Liquidator gives an account of his
acts and dealings.

3 months after the date of registration of the final
accounts (forms E6 and E5), the company is deemed to be dissolved.

Qualifications for appointment as liquidator

The qualifications for appointment as a liquidator are set
out in section
633 Companies act 2014 and there are 5 categories of individual who qualify.

Eligible individuals include practicing solicitors, members
of prescribed accountancy bodies, a person with practical experience of winding
ups and knowledge of the law, members of a professional body recognised by the
Supervisory Authority, and a person qualified under the laws of another EEA
state.

The liquidator will need professional indemnity cover and
certain persons are disqualified from acting as liquidator-for example, the
company auditor, or an officer or employee of the company.

Section 583 of the Act provides that the company can appoint
the liquidator at a general meeting. A general meeting can also remove or
replace the liquidator.

Declaration of Solvency

The declaration of solvency form (E1) must be completed
correctly and it is vitally important to check it carefully before submitting
it to the CRO; if not directions from the High Court will be required.

The Independent Person’s report must contain certain
prescribed information such as the scope of the work performed by the statutory
auditor and the opinion of the statutory auditor that the declaration of
solvency is not unreasonable.

If you are leasing a commercial property you may encounter a ‘side letter’ in addition to the lease itself.

A side letter in such a situation is used by a landlord and tenant-as it is signed by both parties-to modify the terms of the lease itself, generally on a temporary basis. This would be done to confidentially vary the terms of the lease and prevent any knock on comparable consequences for the landlord from other tenants in a development.

An example of this would be a concession in relation to rent for a temporary period of time.

This concession would not be in the public domain as the rent might be if the lease was lodged in the Registry of Deeds or details registered with the Commercial Lease Register of the Property Services Regulatory Authority.

Some points to consider

The time period or special event which is to be covered by the side letter should be clear if the concession is to be temporary and for the particular lessee

If the lease itself contains an ‘entire agreement’ clause then the side letter should be mentioned in the entire agreement statement

If the side letter is agreed and granted at a different time from the lease itself then there should be some consideration given for the side letter, even a nominal sum

The landlord needs to be careful that the granting of the side letter will not inadvertently let a guarantor off the hook

Is this side letter to be binding on a future landlord if the sells the building? Is the side letter to be personal to the existing lessee and not assignable to a new tenant?

The side letter will be terminated if any provisions of the lease are breached-for example, late payment of rent

A problem may arise if the breach of the lease leads to the side letter being set aside as this may amount to a penalty for the tenant which is disproportionate to the loss suffered by the landlord for the breach. If that is the case the side letter may be unenforceable if challenged.

Provided the penalty is proportionate the side letter is likely to be enforceable, however.

Side letters will usually bind a landlord’s successor in title and should, therefore, be disclosed to a any future purchaser. For this reason any side letter should be kept with the lease so that it is disclosed on sale. If it is not disclosed a future purchaser will probably succeed in a claim for misrepresentation and the cost of complying with what has been agreed in the letter.

Did you know you cannot represent your company in Court? You must instruct a solicitor to act for the company.

Let me explain.

I have often seen company directors and/or sole shareholders in the District Court seeking to represent the company. The company is a separate legal entity, however, from the shareholders, directors and members and it may face prosecution or be engaged in legal proceedings and disputes from time to time-for example failure to file tax returns or health and safety prosecutions.

If the company was a natural person it could do so as the director or any individual can represent himself in Court. Whether that is a good idea or not, however, is another kettle of fish.

Many times, the director of the company will go to the Court himself and purport to speak on behalf of the company. This is not permissible, however, as a company director or shareholder or member does not have a right of audience in Court in Ireland.

This rule was first established in a case in 1969, the “Battle” (Battle v Irish Art Promotion Centre Limited) case. This decision was reaffirmed by the Supreme Court decision delivered in October 2018 between AIB Bank and Aqua Fresh Fish Limited.

The Supreme Court stated,

The so-called rule in Battle v. Irish Art Promotion Centre Limited [1969] I.R. 252, when complemented by the inherent jurisdiction and discretion of the Court to permit, in exceptional circumstances, representation of a company by a person who is not a lawyer with a right of audience, continues to be the law in this jurisdiction and is consistent with the Constitution.

Put simply the general rule is that a company must be represented by a solicitor; Courts have the power, in exceptional circumstances, to allow a person who is not a lawyer to represent a company in court. But the general rule is that only 3 categories of person have a right of audience in Court:

The parties in a case

A solicitor instructed by a party in the case

A barrister instructed by a solicitor for one of the parties in the case.

The Exceptions

The exceptional circumstances which may give rise to a Court permitting a company director to act for the company in Court are not clear and there are no guidelines you can follow or anticipate. Regard will be had by the Court to precisely what type of representation the non lawyer individual- director or otherwise-intends providing-for example, whether he/she intends acting in a ‘lawyer’ capacity before and at trial or merely acting on one occasion in Court or in a lesser capacity. Presumably the Court will also consider the complexity of the issues involved in the case and whether the administration of justice will be significantly hampered or delayed.

In addition to the exceptional circumstances referred to above there is a statutory exception pursuant to the Companies Act, 2014-that is, where a company is charged with an indictable offence it may appoint a representative to appear on its behalf in Court.

Moreover, a Court may listen to the views of a director in the interests of justice and to assist the Court; this is a different matter, however, to representing the company as a ‘lawyer’.

Conclusion

A company director or member or shareholder cannot represent their company in Court, the company must ‘lawyer up’, save for exceptional circumstances.

Are you wondering about how to use the internet and social media to start or grow your business?

Do you have a healthy degree of skepticism about what works and doesn’t work?

Have you come across individuals who claim to be experts and gurus in the area but you have your doubts?

I have built my solicitor’s practice almost entirely through digital or online marketing. So what I have to tell you is based on what works, not some theoretical nonsense with no valid evidence or data to support it.

There is plenty of spoofers out there, quite frankly, giving advice about digital marketing, online marketing, social media marketing who really only talk the talk.

Not only will I tell you what works, and what the important metrics for my business are, but I will prove it.

Yes, I will give you evidence of critically important areas I monitor and measure on a weekly basis to ensure my marketing machine is ticking over nicely with a nice, smooth sound.

Ready?

Let’s go.

Website traffic

Firstly, if you were ever involved in a retail business you will know that footfall is critical to your success. Without footfall-that is, passing visitors in the immediate vicinity of your business premises-you will struggle big time.

The online equivalent of footfall is website traffic. How you get visitors to your website can fall into two large categories:

1. Organic methods

2. Paid methods

Organic methods include organic search traffic and social media traffic.

Paid methods include advertising such as Adwords, YouTube advertising, Facebook advertising, and so forth.

Clearly, the best type of traffic is organic search traffic, and there are 2 reasons for this:

1. It is free

2. It is motivated to find a solution to a problem

To clarify, organic search traffic is when you are looking for a product or service and you search online in a search engine like Google. If your website ranks well in the search engines, especially Google, you will get more of this top quality traffic.

So, my number one metric to measure on a regular basis is my website traffic figures. Putting it plainly how many people visit my store each day-that is, how much daily traffic do I achieve?

I have a number of websites dealing with differing aspects of Irish law but the two main sites I look at are:

It is self evident that the more traffic I get the more leads/queries I receive, the more consultations I book, and the more clients I add to my books.

The next time you are being regaled by a ‘guru’ or expert with the latest shiny new object for growing your business online ask him/her how many daily visitors he/she gets to his/her website or blog. It will give you some food for thought and should influence you as to whether to do business or not.

Let’s face it: if the guru cannot get traffic to his/her site how will he/she do it for your business?

Email marketing subscribers

Email marketing is incredibly powerful for it allows you to communicate with potential clients/customers in a way which is expected, consented to, and personal.

Email marketing, however, is not about asking people to sign up for a newsletter (yawn). No, you want to be much more intentional, useful and strategic than that.

Here are a couple of email marketing articles I have written previously, they explain email marketing in greater detail:

From my business perspective, I monitor the number of subscribers to my list on a weekly basis. Today my total number of subscribers is 6,067. The vast majority of these subscribers have signed up for my free employment law report and free weekly employment law tips.

These subscribers are valuable to my business and I am ruthless in ensure good list hygiene by removing anyone whose email address is undeliverable or who have unsubscribed. In fact I encourage people to unsubscribe as I only want people on my list who are interested in what I have to offer.

So every week I will scrub my list to ensure only people who want to hear from me do, in fact, hear from me.

Here’s the proof:

YouTube subscribers

Video is powerful and allows a connection between video maker and viewer that is difficult to achieve with words alone, especially given the attention span deficit of people nowadays.

This is why I put a lot of effort into my YouTube channel.Checking the number of subscribers I have is an extremely regular occurrence.

Today the number of subscribers is at 873 with my first major target being 1,000 subscribers. That should be achieved soon because I am adding an average of 70 new subscribers every 30 days. Here’s the proof:

Conclusion

Understand the digital marketing metrics that are most relevant for your business and monitor them relentlessly

Don’t fall for ‘shiny new objects’

Don’t accept assertions or promises from people who promise to help you grow your business online without getting some cold, hard evidence and facts from them about the important metrics in their own business

In other words, ask them politely, ‘don’t tell me, show me’ when it comes to growing your business online.

Anti Competitive Arrangements

4.—(1) Subject to the provisions of this section, all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void, including in particular, without prejudice to the generality of this subsection, those which—( a) directly or indirectly fix purchase or selling prices or any other trading conditions,( b) limit or control production, markets, technical development or investment,( c) share markets or sources of supply,( d) apply dissimilar conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage,( e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature or according to commercial usage have no connection with the subject of such contracts.

Sections 4(2) and 4(5) set out the exceptions to section 4(1).

The prohibition only applies to separate undertakings, which is defined as

‘ undertaking ’ means a person being an individual, a body corporate or an unincorporated body of persons engaged for gain in the production, supply or distribution of goods or the provision of a service and, where the context so admits, shall include an association of undertakings.

The prohibition does not apply to intra-group transactions as there is only one undertaking, from a competition law perspective. An agreement between employer and employee will not be covered, either, as an employee is not an undertaking. Therefore employment contracts will not fall under the remit of the Competition Act, 2002 and any issues in relation to restrictive covenants in contracts of employment should be looked at under common law restraint of trade principles.

The prohibition includes

Anti-competitive agreements

Concerted practices

An agreement will be seen to exist where one undertaking agrees with another undertaking to limit its freedom of action so as to restrict competition in the marketplace. A concerted practice is a form of coordination between undertakings.

The intention of the parties is irrelevant, it is the object or effect of the agreement that needs to be reviewed.

If the agreement ultimately benefits consumers it will fall within the exceptions found in section 4(5) and will be exempt from the prohibition.

The Competition Authority, established by the Competition Act, 2002 was dissolved and replaced by the Competition and Consumer Protection Commission in the Competition and Consumer Protection Act 2014. It has the power to issue declarations that agreements or concerted practices are covered by section 4(5) and does not fall foul of section 4(1).

Horizontal and Vertical Agreements

A horizontal agreement is an agreement between undertakings between competitors-that is, at the same end of the supply chain.

Vertical agreements are agreements between undertakings at different ends of the supply chain-for example, manufacturers and distributors.

Horizonatl agreements are hard core offences and subject to severe penalties as they are agreements between competitors and are more likely to be anti-competitive. Vertical agreements, by contrast, are generally exempt as they have a lower risk of anti competitive effect.

Abuse of Dominance

5.—(1) Any abuse by one or more undertakings of a dominant position in trade for any goods or services in the State or in any part of the State is prohibited.

No exemption is possible from this prohibition, it is an absolute prohibition and dominant companies have a particular responsibility to avoid abuse of that dominance.

What is a dominant position? There is no widely accepted definition but any company with in excess of 40% of the market is going to raise concerns. The test is whether the concern can act independently of others in the marketplace.

Other factors which will be looked at in determining dominance will include:

Barriers to entry to the market

Customer switching costs

Barriers to expansion

Market share of the entity being looked at-a consistent market share of over 40% will cause concern

The prohibition in section 5 above refers to ‘one or more undertakings’, therefore a situation of collective dominance could arise if more than one undertaking acts in concert with another.

When looking at a breach of section 5 consideration will be given to

Is the undertaking ‘dominant’

Has its conduce been an abuse of its dominance-te conduct is not abusive if it can be objectively justified and proportionate to a legitimate aim.

A breach of the Competition Act, 2002 can also lead to personal liability for an officer or employee of eh company.

Enforcement of the Competition act, 2002 is through both civil and criminal means.

Any aggrieved person can make a complaint to the Competition and Consumer Protection Commission, formerly the Competition Authority. This body and the DPP can institute criminal proceedings to enforce the Competition Act, 2002 and the Competition and Consumer Protection Commission has extensive powers to carry out raids to obtain records relating to competition law. This allows them to search both business premises and private homes of executives or officers of the company.

They can also summons witnesses to attend before the Commission.

Moreover, an aggrieved person can institute legal proceedings in the Circuit or High Court for breach of section 4 or 5 of the Competition Act, 2002. The aggrieved person, if successful, may obtain an injunction and/or damages and/or a declaration from the Court.

An important thing to consider is that the Competition Act, 2002 shifts the burden of proof from the prosecutor to the defendant in a criminal prosecution and criminal prosecutions can be carried out by the Commission for summary offences and the DPP can prosecute on indictment.

Section 50 of the Act also provides protection for whistleblowers who act in good faith.

Conclusion

If you are a small business owner and you have been the victim of abuse of dominance or anti-competitive arrangements the Competition act, 2002 provides strong remedies to put a stop to it and make competition in your market fairer.

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